Bypassing the states

Can Parliament pre-empt state government resources through ‘rights’ laws?

The Food Security Bill is expected to be discussed in Parliament in the next few days. There have been several critiques of this Bill in terms of the coverage of the population, amount of grain, the mode of subsidy (food versus cash versus vouchers), availability of food grains, the overall cost and fiscal implications etc. Importantly, in the last few months the chief ministers of Tamil Nadu and Gujarat have written letters to the Prime Minister on Direct Benefits Transfer and the National Food Security Ordinance. Among other issues, both letters talk about the roles of the centre and the state governments.

However, there has been little public discussion on the issue of mandatory expenditure related to statutory rights. Most development programmes and subsidy systems in India have traditionally been in the form of government ‘schemes’. The expenditure required to implement these programmes has to be approved by the legislature on an annual basis through demands raised in the annual budgets. Through this process, the legislature expresses its priorities by allocating financial resources among various competing demands.

The Constitution places the responsibility of allocating resources on an annual basis on the legislature by stating that all government expenditure (except a few charged items) have to be approved by the legislature through a vote. The last decade has seen a divergence from this principle by enshrining certain development/subsidy entitlements as statutory rights.

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) was passed in 2005, and provides the statutory right to people living in rural areas to get a job for a certain number of days every year at a specified rate. The cost is borne by the union government. This right is justiciable, i.e., any person who fails to get the job on demand can approach the courts for remedy and compensation. Therefore, Parliament has no choice but to provide for the amount required to deliver this right. Indeed, if Parliament under-allocates the amount required, and a court rules in favour of any complainant, the government will be bound to spend the money. This is due to the Constitutional provision that any expenditure arising from the ruling of a court is a charged item, and is not subject to a vote by Parliament.

Of course, if a future Parliament decides to change its priorities, it has the freedom to amend or repeal the law that mandates the right. However, some of the new laws mandate expenditure by state governments, and state legislatures may not have the power to undo or modify the statutory right.

The Right to Free and Compulsory Education Act (RTE) was passed in 2009, and entitles every child between the age of six and 14 years to elementary education in a neighbourhood school. The costs for doing so are to be shared by the central and state governments.

Unlike MNREGA, the right to education stems from a fundamental right that was read into the “right to life” by the Supreme Court in 1993, and was written into the Constitution as Article 21A in 2002. Therefore, future Parliaments will have limited freedom to amend the law. Indeed, this fundamental right differs from the others in the sense that it obliges the state to perform a duty whereas the other fundamental rights protect people from the actions of the state or other persons.

A second concern is that Parliament has enacted a law that obliges state governments to allocate resources. Given that this is a concurrent list item, state legislatures cannot amend the provisions to override the central law. The question is whether this infringes on the role of state legislatures to determine their preferences and allocate funds accordingly.

The National Food Security Ordinance, 2013 and the associated Bill have a similar issue in terms of the expenditure by state governments. The law provides a statutory right to a certain quantity of foodgrains (or equivalent cash) to all persons who fall within its coverage criteria. The cost of procuring, storing and transporting the foodgrains up to the state storage depots are to be borne by the union government. The cost of the subsequent supply chain is to be borne by the state governments, although there is an enabling provision that permits the centre to provide financial assistance. Again, the issue is whether Parliament can pre-empt the role of state legislatures in allocating the resources of the state.

Purists may argue that the establishment of any statutory body (such as central and state information commissions) has similar implications, and it has been customary to establish them. The key difference is in the materiality of the amounts involved. Typically, the establishment of such bodies requires a few hundreds of million rupees, which would be a small part of the overall budget (the central budget is now about Rs 16 trillion). These three Acts – MNREGA, RTE and the Food Security Law will together cost between Rs 3 trillion and Rs 4 trillion (estimates for the costs of the food security law have a wide variation). Therefore, the impact on resource allocation is significant. That is, these rights have the effect of pre-empting the resource available to other potential programmes.

On the receipts side, there is an established system of Finance Commissions determining the division of resources between centre and states. Also, there has been a contentious debate with respect to the Goods and Services Tax (GST), with extended negotiations on a framework to reach a common GST system within the federal framework. The enabling amendment to the Constitution is still pending before Parliament.

There has been little such debate on the expenditure side. The core concept of the federal structure and the implications for the role of Parliament and state legislative assemblies to determine spending priorities need to be discussed in the context of resource-intensive statutory rights being enacted. The scheduled debate in Parliament on the food security bill is an opportunity to finesse the various arguments. We will have to see whether our MPs, including those who have, in the past, voiced their concerns on issues related to the aspirations and rights of states, discuss this matter.